Trends in Michigan Hotel and Motel Tax Collections:
Indicators of a Tourism Sector Under Stress
 
By Charles Shih, Lori A. Martin & Don Holecek, of the MSU Tourism Resource Center
 
MSU Tourism Resource Center staff members have been tracking Michigan hotel and motel sales and use tax collections since the Center was established in 1985.  The data are obtained from the Michigan Department Treasury (MDT).  We are indebted to Andrew Lockwood for the effort he expends to provide these data to us in a timely fashion.  These are indeed very valuable data as they provide objective information about the performance of the lodging sector of Michigan’s tourism industry, but they are also the only readily available indicators of trends in overall tourist spending in Michigan.
 
In preparing our most recent monthly and seasonal Michigan travel activity reports (available on the web at Michigan Travel Indicator Reports), we noticed an unusual decline in performance of the industry and decided to explore the data in greater depth.  As we had data available for the first six months of this year, we elected to compare these to data from the first six months of the period 1999 – 2001.  During 1999 and 2000, the overall U.S. economy was in the final phase of an extended expansion, which ended with a recession that began in March of 2001.  The economy resumed its growth near the beginning of this year, although the recovery has been slow and tenuous to date.
 
The monthly tax collection data are proved in Table 1, but the trends in them are more evident in the set of four figures that follow.  Turning to Figure 1 which illustrates the trend in tax collections* for the first six months of the years 1999 – 2002, it is apparent that lodging revenues grew between 1999 and 2000, remained essentially unchanged between 2000 and 2001, and fell back to about their 1999 levels in 2002.  Monthly data are provided in Figures 2 – 4.  The trend observed in combined sales and use data confirm the 2002 fall back in the lodging sector’s performance to 1999 levels.  The monthly performance of the sales tax statistic presented in Figure 3 is more mixed, but weakness throughout 2002 is clear.
 
Figure 4 paints a somewhat more optimistic performance of room sales revenue in 2002.  June 2002 stands out as an especially weak month across all three of these monthly figures.  We hope this is an anomaly in the data and not the beginning if a significant downward trend in industry performance.  The reader should note that these are nominal data, which have not been adjusted for inflation.  Inflation, while moderate over this period, would of course exacerbate the weakness already noted in the economic performance of Michigan’s lodging industry.  We expect this weakness has been caused primarily by a dramatic decline in business-related travel, especially in southeastern Michigan.
 
* Use taxes are paid based upon room sales, and sales taxes are paid on other services provided by hotel and motels, primarily restaurant meals.
 
 
Table 1.  Michigan Hotel and Motel Sales and Use Tax Collections. January- June 1999-2002.
 

Sales & Use Taxes
Year	Jan.	Feb.		Mar.	Apr.	May		Jun.
1999	$6,066,073	$6,113,552		$6,625,743	$6,834,050	$6,527,177		$8,807,434
2000	$7,037,866	$7,060,351		$7,668,706	$7,433,885	$7,465,008		$8,953,366
2001	$7,157,459	$6,954,004		$7,081,494	$7,970,104	$6,974,072		$8,899,686
2002	$6,683,122	$6,391,150		$6,616,202	$6,574,594	$6,999,915		$7,283,175
Sales Tax
Year	Jan.	Feb.		Mar.	Apr.	May		Jun.
1999	$3,120,640	$2,998,976		$3,093,315	$2,838,492	$3,161,130		$3,981,229
2000	$3,622,067	$3,343,508		$3,500,497	$2,022,338	$2,972,294		$3,928,377
2001	$3,379,009	$3,175,672		$3,059,434	$2,594,298	$2,937,079		$3,823,641
2002	$3,266,204	$2,798,139		$2,883,212	$1,957,830	$2,766,729		$3,146,397
Use Tax
Year	Jan.	Feb.		Mar.	Apr.	May		Jun.
1999	$2,945,433	$3,114,576		$3,532,428	$3,995,558	$3,366,047		$4,826,205
2000	$3,415,799	$3,716,843		$4,168,209	$5,411,547	$4,492,714		$5,024,989
2001	$3,778,450	$3,778,332		$4,022,060	$5,375,806	$4,036,993		$5,076,045
2002	$3,416,918	$3,593,011		$3,732,990	$4,616,764	$4,233,186		$4,136,778
January - June
Year	Sales & Use Taxes		Sales Tax		Use Tax
1999	$40,974,029		$19,193,782		$21,780,247
2000	$45,619,182		$19,389,081		$26,230,101
2001	$45,036,819		$18,969,133		$26,067,686
2002	$40,548,158		$16,818,511		$23,729,647

 
 
Figure 1.
 

 
 
Figure 2.
 

 
 
Figure 3.
 

 
 
Figure 4.